The uncertain future of Europe’s “people’s cars”

A number of recent signs point towards an uncertain future for the “people’s cars”: the market’s most affordable models and those most often bought by private motorists.

The threat to the survival of these “people’s cars” stems from the need to cut industry emissions through electrification, as well as the introduction, in mid-2022, of new safety equipment that will be mandatory on every car. This will inevitably raise manufacturing costs, which will be passed on through higher prices for buyers.

Two developments appear likely over the coming years: prices for these smaller, more affordable cars will rise, bringing them uncomfortably close to larger models, while the choice of available models will shrink, particularly in the city-car segment.

City cars and superminis facing fewer successors

The evidence for the latter is already clear. Renault has confirmed that the Twingo will not receive a replacement; the Peugeot 108 and Citroën C1 siblings will not be succeeded either - although the Toyota Aygo will be replaced by a larger, more expensive crossover -; and the Skoda Citigo has already vanished from price lists, with no rumours even of replacements for its Volkswagen up! and SEAT Mii siblings.

Even Europe’s segment leaders, the Fiat Panda and Fiat 500, are expected to leave the stage. The former will move up a class, becoming a larger and more expensive B-segment crossover, while the latter is reportedly set to be limited to its more expensive electric version in the medium term.

There are also significant changes beginning to emerge in the supermini segment, Europe’s best-selling class. First, Audi’s chief executive questioned whether the current A1 would have a successor because of the segment’s poor profitability. More recently, the announcement that Ford’s next electric model will be built in Cologne from 2023 - the same factory that produces the long-running and popular Fiesta - raised a whole series of doubts about its replacement: will there even be one?

When I wrote some time ago about cars becoming increasingly expensive, I did not consider the possible consequences for car manufacturers’ plans.

What is now becoming clear from the strategic plans announced by several car groups over recent months is that they all seem to share one feature: moving upmarket and concentrating on higher segments - even Dacia, for example, will offer a C-segment SUV - where the cost/price equation can be managed more effectively and profitability can be higher.

For manufacturers, developing smaller and more affordable cars is becoming both less appealing and more difficult. Historically, such cars have meant low profitability, offset only by high production and sales volumes.

The future of “people’s cars” looks far from bright

Over the next few years, the picture taking shape suggests that the most affordable end of the market will not only become progressively less accessible, but that the model line-up will be dominated mainly by crossover/SUV-type vehicles. It is not difficult to understand why.

Crossover/SUVs cost several thousand euros more than the cars from which they are derived and with which they share virtually everything. That provides greater profitability for their makers, and, as sales charts have shown, does not appear to be harming their commercial performance.

Electrification and nostalgia reshape the affordable market

At the same time, a new trend is gathering pace: image-led, nostalgia-heavy superminis (B-segment models), which are becoming brands’ preferred candidates for full electrification - a technology that will remain considerably expensive for more years than anticipated.

We have already seen this with the Honda e, while a Renault 4 and Renault 5 have also been promised. These proposals join the smaller Fiat 500 - the new, 100% electric model - and the MINI, which will enter a new generation in 2023. There are plenty of rumours about further models of this kind from other marques. They will not be the most affordable options, but they will certainly be among the most desirable. Like crossover/SUVs, they also allow manufacturers to manage the cost/price balance of their offerings more effectively.

However, although these decisions are fully justified by all the changes taking place in the motor industry, they will make access to new cars more difficult for an important part of the market.

In Europe, the car market is split into two broad groups: private buyers and companies/fleets. Looking at sales to private motorists, the Dacia Sandero and Duster are the best sellers, two of the market’s most affordable and practical models. They are followed by other conventional superminis and city cars, showing that the purchase price remains a crucial factor.

This situation may change in the long term, once the transition to electric and connected mobility has progressed, its costs begin to fall and returns increase. Until then, though, the “people’s cars” may have to endure a long journey through the desert.